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8 European Countries In Outright Deflation As Inflation Expectations Crash To Record Low
Forward inflation expectations for Europe have collapsed to all-time record lows (based on 5Y forward implied 5Y inflation) as the market grows increasingly impatient at Draghi's dragging his "whatever it takes" feet on pulling the sovereign QE trigger.
With 8 European nations now in outright deflation, the growing political pressure on the ECB to actually "do" something is, however, equal and opposite to Germany's (read Buba's) insistence that member states have some fiscal discipline (oh and the fact that OMT may just be exactly what we always said it was - illegal and a mirage).
With France shunning Brussels laws directly, and Italy flouting the "hookers-and-blow" GDP adjustment to improve its debt-to-gdp ratios, is it any wonder that Germany sticks to its anti-hyperinflationary, fiscally responsible guns... But then again, as we have seen again and again with the failed European Union, beggars can be choosers as politicians are unwilling to give up their perks in favor of helping the people that voted for them (or didn't in some cases).
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Yep.
maybe the EU should consider replacing the Euro with the dollar. we have no problem printing up as much as they can eat.
Maybe time for Draghi to resign? Goldman can't get it's way because Merkel is under too much pressure at home. OMT was never a real prospect, just a jawboning exercise. Bye bye Super Mario.....
"maybe the EU should consider replacing the Euro with the dollar. we have no problem printing up as much as they can eat."
Maybe they can also use the US Constitution also because it isn't being used at home...??
no go. France and The Netherlands said they already have theirs, and thanks, but no, thanks. And Britons carry the absence of a written constitution like others their (funny) hats
and while the US Constitution is quite a beauty... damn, it's old. It had no meaningful update since a generation or two. it's practically an antique, made for a completely different country, in a completely different age
That's the gist of it.
The US has actually no written constitution, just like the UK, no wonder those countries have the same legal tradition. The so called US constitution is not much more than Englands "Magna Charta".
you are making a hash out of constitutional setups and legal traditions
I can't wait for CD rates to reach 15%+. I'll quite my fucking job bitches!!! Thanks Fed pricks!
"Déjà vu all over again." - Yogi
Its difficult to make predictions, especially about the future.
Paraphrasing the Great Yogi:
"Nobody goes to Europe anymore, it's too crowded."
"90% of economics is half mental."
“Relax,” said the attendant as he pulled hard on leather straps fastened to the Byzantine soldier’s body armor, “as you know, tapering is NOT tightening.”
Europe - Beating expectations till morale improves.
not enough beating, yet. for example, I haven't heard about new police razzias in banker HQs. btw, where is the HQ of LULZBank? some humorous place?
Cow bells. Ring a bell?
LULZBank has a habit of ending up in odd unexpected places.
Deflation, bitches. I've been saying it here for years. I've endured downvotes by every goldbug who desperately hoped for hyperinflation to justify their corvid-like obsession with shiny things. Vindication is sweet!
Anything IS possible Mr. Mcormick! Glad to hear your crystal ball is all tuned up. Please do tell what's next?
What on earth are you talking about? They tried desperately to drive down the "price" (what a joke) of PMs yesterday but could not. The jig is up! Game over. The lows are in and we will see $2000 gold by Christmas.
# 9 you are right. It will be deflation until the suffering is to bad to handle and than all hell will break loose. Step one will be painful deflation and the evaporation of trillions of dollars of asset value and stock market wealth. Step two will be the running of the printing presses and a resultant inflation. All is not lost though.
Solution -- have cash now and than buy assets before inflation strikes. It may be a way to acquire solid value added assets.
Im going to wait till tommorrow to buy my can of Beans for dinner, you think it will be cheaper?
I hear Spain and Italy are nice this time of year. Looking at retirement options. Ever cheaper vino, pasta and olive oil. Gotta love it.
But, do they still accept joobucks?
Tyler, I protest! How can you possibly construct such a delicious phrase like this "With France shunning Brussels laws directly, and Italy flouting the "hookers-and-blow" GDP adjustment to improve its debt-to-gdp ratios, is it any wonder that Germany sticks to its anti-hyperinflationary, fiscally responsible guns..."
it's a work of art. It would take me ages to take it apart, praise the good parts and comment on where I find too much spin
oh, what the hell, who cares. minus 1.4 in Bulgaria and plus 1.8 in Romania. truly, a case of hyper-deflation and one of hyper-inflation. bad, bad EUR
the funniest thing about monetary zones is that people living there experience "the world", i.e. many readers here have big, big problems even believing that prices are currently stable in the eurozone - on average, depending from the baskets, which do include food and energy. I just had guests from London that were shocked from this effect. You could literally watch them having an attack of dizzyness from visiting the same shops as two years ago and encountering the exact same prices
What do you think would happen, if somehow, the EU/EMZ "forced" France into brining its debt in line with the treatys?
Haus, I think I made my point more then clear. Look, this blog is full of people that use words like sovereign and treaty. Yet they have strange definitions
From memory (I do read treaties), the shocking tool the EU Commission can use to castigate France is... a fine. This does not mean a lot of things, and I'm perfectly sure that my statement will again be misunderstood completely...
... but at the end, it all comes back to definitions, like sovereign, treaty, confederation, obligations, your "beloved" solidarity, parliamentary republic, constitution, etc. etc.
in short, it feels like elves from the magic lands meeting dwarfes from the grimy mountains. a cultural matter, stemming from a radically different history
Counterquestion: If the semi-sovereign federated State of Hessen would do that, the Federal Republic of Germany would deploy... tanks? At least, it could
From my memory, the EU Commission can do nothing. It´s the European Council that has the right to put a fine on France. France will not have a vote in this decision bzw.
damn, Wolferl, don't you dispel EU Myths, here! What is this damn European Council that has all the powers, the military might, etc.? I'm quite sure that it's full of unelected and utterly unknown people with no oversight whatsoever from their national parliaments
let me see: Cameron. I'm sure Britons don't know him. Merkel. Germans must be astonished, who is that gal? Who sent her there? Renzi. I'm also sure Italians don't know him, and he really, really has never been elected. Kenny. Irish must be livid, who is that guy? and so on...
to come back to Haus' question: not even one of them - with the possible exception of Cameron - is going to do something to France without having a clear discussion about it at home, meaning at least with the various leaders, speakers and "whips" of their parliaments
and this, my friends, is "applied confederative principles". another way to say that it's a club of sovereigns, though I noted I'm not understood, when I write that
Sorry, my bad, you right you cannot expect people have a clue about the EU here on Zerohedge.
So to summarize -
No one will do anything to France blowing the 3% limit out of the water. France will go even further down the tubes. Seems to me that the EU follows the rules if it helps the EU/EMZ, and if the rules hurt the EU/EMZ then they are either ignored (in this case) or changed (see, Irish vote re; Lisbon.)
nope, that was not my conclusion. You are a number cruncher, aren't you? The most important number about France is that their "state quota" - a word for which I don't find an equivalent in English, but it's about how much government consumption and investment there is compared to the country's total - is above 50%
in other words, France could "liberalize" quite a bit of it's economy. but it has a heavy political cost, particularly for the socialists. who then point out that a few percentages points above 3% of French GDP are becoming "spare change", in financial terms. Cue in the fretting about things changing soon, particularly in the regard of the Mighty Dollar
my conclusion is that you are too fast, too impatient: what you are witnessing is a discussion among the sovereign peers in the EMZ. this kind of thing is always first done at gov-to-gov level, and then ventilated in the parliaments
when the discussion is among the parliaments of Germany, France and Italy, you have to remember that it takes a while. after all, it's some 3'000 people talking in the first rank, with all in all some 30'000 primary stakeholders. I won't be making excuses for this real and existing piece of republican democracy at work
at the moment, the discussion is about how much procrastination, while keeping the goal of balanced budgets
you know how long it took to even get us here? traduce it in numbers, tell me how much overspending they are really planning, and compare it to the rest of the world. compare it with the new net debt the US is planning - note, planning - for 2015 (it's 250 billion)
patience is a virtue
and no, your reference to the Irish vote... I can't accept that
why did the Irish vote yes, the second time? Do you accept referenda only when it suits you? That was another sovereign act, a pure Irish one. A sovereign is entitled to change it's mind, even several times, back and forth. The most horrific referenda are those where people get to vote once... and then never again. This is how a referendum becomes a blunt instrument, not it's repetition
the Irish had a national discussion. then they had a vote
then, they had again a national discussion, and then they had again a vote
the two discussions were... intense. in the second, practically all sides had to somehow admit they were talking past the real issues, and deepened that discussion, with the first "no" clearly as the new status quo... which a majority realized it wasn't what they really wanted, particularly after some politicians went off their high horses, which was actually part of what caused the first "no"
why do you put more weight on the first "no", and less on the second "yes"? is this the way you'd treat a peer?
are you sure you really support sovereign independence? then again, we are talking about treaties. those are, at the end, simple agreements among sovereigns
which, in our context, are peers. the exit door is open and must be open, or we lose the values we are trying to preserve
it may not be on the street yet, deflation/inflation does take time to filter from the monetary side to people's pocket-book side.
but I do see what you are saying, the macro data does show QoQ infation slowing or falling,
http://www.tradingeconomics.com/euro-area/inflation-cpi
but consumer price index do seem to be steadily rising (although if you drag out CPI far enough it does seem the rate of increase is slowing a bit in recent years, but yes, it's still increasing)
http://www.tradingeconomics.com/euro-area/consumer-price-index-cpi
well, there is always the third option: biflation, deflation in monetary assets + inflation in houshold items, wouldn't that be fun :)
Inflation benefits borrowers (pay debts with less valuable currency). Deflation benefits lenders (loans repaid with more valuable currency). Europe (and US) decision-makers haven't "failed" for six years....they're accomplishing just what they set out to do.
Right.......It's so much easier to pay off those credit cards when the price of your food and other necessities consumes an ever increasing amount of your fixed income.
Inflation only benefits those debtors whose income will actually grow with inflation.
Welcome to stagflation....which benefits lenders (asset holders) even more than deflation.
There's a big difference between inflation created by wage-earners spending more and saving less (that's where you'll get those debtors with rising income that you refer to) and inflation created by printing currency (where we are today). With the former you get investment, rising income, and a decrease in wealth inequality. With the latter, you get zero (or negative) investment, zero (or negative) income growth, and an increase in wealth inequality.
"Good" inflation for wage-earners is "bad" inflation for lenders (asset owners), and vice versa. You (and I) have got the "bad" inflation now (stagflation)....but it ain't because the decision-makers have failed. In fact, the decision-makers have been wildly successful for the past 6 years...just ask their accountants.
From what I have heard, food and other necessities used to consume most of a persons income about 20-30 years ago. The trend changed whereas now its the rent/mortgage.
Maybe we will see a reversal in that trend.
Inflation in things you need and deflation in things you own.
You're mostly right. But, deflation does not benefit lenders because many borrowers will simply not pay back loans; they'll default. The lender will lose. If you save your money and put it in a bank, you are effectively lending it to the bank for a very small rate of interest. If the bank goes under you'll lose it.
Deflation really only benefits those who are frugal with their money, those without debt and those who have skills that are useful to society (that does NOT include skills such as real estate agents, lawyers, bankers etc.).
Sgt. Maj. Page to St. Louis Oath Keepers: The End of American Sovereignty & Constitutional Rights
Economic collapse coming to the US. Don't get distracted by other events. Rex 84 coming next.
https://www.youtube.com/watch?v=1XA_yW7Z5OM
Deflation, we can't be having that. We don't want the serfs getting more for their fiat.
This.
I mean -- in a time where wages aren't keeping up with COL -- god forbid prices go down for the sheeple.
Too true and "working as intendedtm":
"..in real dollars, U.S. (and Western) paycheques have shrunk by roughly 2/3 over a little over four decades – all the way back to (literally) Great Depression levels. With Reality now presented and defined for us; we can revisit the claim by B.S. Bernanke that inflation is “good” and “deflation” is bad.
If inflation means continually shrinking dollars and continually shrinking paycheques; then obviously deflation is the opposite. Prices go down as our currency appreciates, and our paycheques (in real dollars) increase in size. This is “bad” for us?
Clearly, the Bankers (and our governments) have been lying to us. It is inflation which is the ultimate evil/horror in any economy, and deflation which is (in fact) an expression of economic health. Why then have the Bankers been able to successfully deceive the masses into believing the precise opposite of what can be demonstrated with simple arithmetic and logic? Because deflation is bad for the Con-Men themselves.
What happens when there is deflation in any economy? Asset-bubbles immediately implode, and Ponzi-schemes collapse. Deflation is a cleansing force which purges all bad debt (and fraud) out of any economy. Deflation is viewed by these Bankers as the Ultimate Evil because they are the ultimate Con Men."
The Great Inflation LieWrong. The only thing deflation cleanses is the middle class. Stick with me on this...
There's two types of inflation. The first type is created by wage-earners (borrowers) saving less and spending more. This inflation creates investment and rising incomes, and decreases wealth inequality. It also allows wage-earners (borrowers) to repay loans with less valuable currency. Let's call this "good" inflation.
The second type is created by printing money and artificially depressing interest rates. This inflation kills investment and incomes, and increases wealth inequality. It creates higher asset prices. Let's call this "bad inflation".
You can probably argue for two kinds of deflation, but here's what they both have in common: they're both income killers. (It doesn't matter if your food bill goes down by 30% if your income has gone down by 100%.) Here's something else they both have in common: loans are repaid with more valuable currency. Collateral is called in (maybe your home, maybe a claim on your future earnings, maybe increased property tax rates....etc).
Asset owners (lenders) are wary of deflation...it's unpredictable, it's uncontrollable, and it reduces the liquidity of their investments. So, in today's world, they've figured out how to use an indifferent legal system, regulations bought and paid for, and monetary policy to create "Stagflation"...basically, "bad" inflation.
Now, as the lack of investment has caught up with the owners and they can no longer maintain Permanent Stagflation, they need to choose between actions (or inactions) that create "good" inflation (ie, paying wage-earners more and having loans repaid with less valuable currency) or deflation (ie, maintaining or increasing their share of wealth). What do you think they'll choose?
The decision-makers ain't fair and they ain't stupid. Deflation is coming, and it's not because the decision-makers have failed in meeting their objectives. It's because they've succeeded.
You're making it way more complicated than it really is.
If you use the classic definition for inflation (which is what I personally use):
-Inflation is defined as an increase of the currency supply and/or credit.
-Deflation is defined as a decrease in the currency supply and/or credit.
Note this has nothing to do with prices.
If you use these definitions then things make more sense.
"Asset owners (lenders) are wary of deflation"
If I own an asset and its' value crashes, it's an irritant. If, however, I owe on an crashing asset, problem for me and guess who? Lenders (banksters) and people betting on leverage fear deflation. (didn't junk you)
One other potential path to economic "prosperity" would be for a society to increase the rate at which they INNOVATE new VALUE-ADDING technologies.
All the serfs are deeply in debt. The banksters are getting more from the serfs for their fiat.
Just lie back and think of Brussels.
that's a tad too... British. and Victorian. on the continent, the original phrase was never understood
what is wrong with deflation? Poor people can buy more! This stupidity of trying to raise the prices of everything so only the very wealthy can buy things is stupid!
but does it help... bankers? no? down with deflation! unleash the Dr. Krugman window-breaking Martians!
Shit! Better raise rates...................
Draghi's waiting until deflation reaches the shores of the northern economies. Until then he's happy to see southern European countries suffer 40-50% youth unemployment, starvation, mothers abandoning their newborns, viable businesses going broke and infrastructure falling apart. It's an economical civil war.
Everything We Are Told About Deflation Is A Lie | ZH
“Severe deflation threatens at an existential level bankrupt banks and the bankrupt governments that perpetuate their existence. Deflation is a mortal enemy to the heavily indebted state and its embedded parasites, but it is a friend to the saver and to anyone with a positive net worth. Because it is so dangerous to the debtor, (unelected) central bankers clearly feel they have no option but to incinerate savers at the altar of perpetuating an unsustainably indebted banking and political elite.”-- Tim Price
http://www.zerohedge.com/news/2014-04-19/everything-we-are-told-about-de...
In a land of $7.00 gasoline, $5.00 bottles of Coca-Cola, and million dollar 'relics' (homes with crumbling walls and no plumbing) - a little deflation may not be a bad thing.
It will take a lot more than a little deflation to fix things.
In a few years, except for elite areas, the properties will be truly derelict and people will have to learn the building trade themselves to fix their properties or be prepared to live in sub human conditions.
Germany should just leave now and go with the winners who are going to be buying the next 100 years of Mercedes, Russia and China.
Inflation is a tax. What the bankers are defining as current deflation is a drop in the inflation rate as they define inflation based on their hedonic adjustments which they use to mask true inflation. For instance, read on to get an idea of what they’re up to in this excerpt from the WSJ:
Low National Inflation Rates Put Pressure on ECB
German Inflation Has Stabilized at Very Low Rate While Prices Are Falling in Spain | WSJ
“Germany's statistics office said annual inflation in Europe's largest economy was 0.8% in August, unchanged from July's reading. Prices were flat compared with last month. The August reading was driven by a sharp decline in energy prices, which was offset by a slight rise in food inflation and an increase in services prices.
“Low German inflation makes it harder for struggling economies in Southern Europe to rebalance their economies. For Spain, Portugal and other countries on the bloc's periphery to become more competitive, they need to have inflation rates below that of Germany.
If Germany's inflation rate were 2% or higher, they could do this with lower, but positive, rates of inflation. With German consumer prices growing so slowly, however, countries in Southern Europe must run extremely low, or even negative, rates of inflation to restore competitiveness. That raises the risk of a deflationary spiral that threatens consumer and business spending while making it harder for companies and governments to service debts.”
http://online.wsj.com/articles/low-german-inflation-puts-press
The inflation in Ireland is a result of the purchase of high end conduit like goods such as new cars (much of this to service the car rental tourist sector)
The real domestic and local economy no longer exists as there is no local demand for goods.
Inflation and deflation metric debates - completly miss the point anyhow.
ever since the euro thing got started (1970s) proper we have seen massive transfers of real purchasing power to the corporate consumer war economy sector.
True, but you could have pointed out the ever-growing transfers to the bloated public sector bureaucrats as well.
good. we need a little deflation. too many
fucking people too. this crazy breeding
isnt working. not if we stay exclusively on this planet.
Cmon Elon. buy Tesla.